Glencore leads FTSE up as investors cheer debt plan
TROUBLED miner Glencore was given a shot in the arm yesterday, and led the FTSE up after announcing plans to slash its debt by $10bn (£6.5bn).
The firm’s share price rocketed by around 12 per cent yesterday morning, and closed trading up 7.02 per cent at 131.80p. The miner’s shares have fallen by around 60 per cent over the past year, hit by difficulties around commodity prices. Copper and coal, two of the firm’s key products, have sunk to six-year lows in recent months.
Glencore unveiled plans for an equity capital raising of up to $2.5bn alongside the raft of capital preservation and debt reduction measures, which include suspending the 2015 final dividend and the 2016 interim dividend.
The group also plans to make $2bn from asset sales. The issue will be underwritten by Citi and Morgan Stanley (or at least 78 per cent of it will), with the remainder coming from commitments from Glencore senior management, including the chief executive Ivan Glasenberg, finance chief Steven Kalmin and several board members.
“Recent stakeholder engagement in response to market speculation around the sustainability of our leverage, highlights the desire to strengthen and protect our balance sheet amid the current market uncertainty,” said Glasenberg and Kalmin in a joint statement.
“We remain very positive on the long-term outlook for our business and this is reinforced by senior management’s commitment to take up 22 per cent of the proposed equity issuance.”
Augustin Eden at Accendo Markets said yesterday’s reaction to the news could mean that Glencore has reached its rock bottom, indicating that the stock will continue to rise.
“You will always find people getting into a stock at the bottom of the market,” he told Morning Wire. “If you don’t mind a bit of volatility then Glencore is not a bad one to get into.”
Analysts linked Glencore’s announcement to a bounce in the copper price yesterday, which also pushed Chilean mining group Antofagasta up, by 7.53 per cent.